Why next three weeks matter most for reforms

Parliament resumes the Budget session today. In the remaining three weeks of the session, Parliament is scheduled to examine the demand for grants by some ministries, consider budgetary proposals including the finance Bill, and approve the spending plan. In addition, a number of Bills have also been lined up. There could, of course, be other contentious issues, including Coalgate and 2G.

News reports indicate that the government and some opposition parties, including the BJP, have reached a consensus on the land acquisition Bill. The Bill has evolved as it passed through the standing committee, a GoM and all-party discussions. In its latest avatar, the Bill permits acquisition for a limited number of purposes, which includes defence, infrastructure, development schemes, urbanisation and manufacturing zones.

The compensation is fixed at four times the price in recent transactions in rural areas and double that in urban areas. If the land is to be used by private companies, consent of 80% of owners is required; in the case of PPPs, 70% of owners must agree. Several areas, including national highways, railways and atomic energy, are excluded from the purview of the Bill. The food security Bill will also be in the priority list of the government.

This Bill creates statutory entitlements of food grain to 75% of rural and 50% of urban population. Several current schemes are being modified and converted to statutory rights. There are some contentious issues in the Bill: coverage (whom to entitle), delivery (direct delivery versus cash transfers versus food coupons) and the outlay required.

In particular, there are varying estimates on the financial impact. The new Companies Act has been passed by Lok Sabha, and is awaiting the approval of Rajya Sabha. The focus of the Bill is to shift the onus of oversight away from the government to shareholders through special resolutions; it also permits new types of companies; requires independent directors; increases the powers of creditors and so on.

The contentious provision is that 2% of profits have to be allocated to corporate social responsibility programmes. The agenda for the session includes the pension Bill, the insurance Bill and the forward contracts Bill. The pension Bill creates a statutory regulator for the sector. Interestingly, many provisions of the Bill, including creation of the new pension scheme, have been effected through executive order; the regulator has no statutory powers but operates by signing an agreement with the market participants.

The insurance Bill increases the FDI limit from 26% to 49%; it is not clear whether the government has managed to build consensus on this issue. The forward contracts Bill permits derivatives, including options, in commodities. The Bill has been stalled on apprehensions that commodity derivatives in agricultural produce may create volatility in spot markets and lead to food inflation.

It may be pertinent to note that over 85% of the volumes traded are in bullion, energy and metals, all of which are linked to international markets. The agenda list does not include the new direct taxes code Bill or the constitutional amendment related to goods and services tax. It looks unlikely that these tax reforms will be completed in the tenure of the current government.

A number of Bills have been listed that address the issue of corruption. The Lokpal Bill, the judicial accountability Bill and the whistle-blower Bill have all been passed by the Lok Sabha over a year ago, and have to be taken up for discussion by the Rajya Sabha. Also listed is the citizens grievances Bill that requires all government departments to have service delivery charters and creates a grievance redressal mechanism.

Soon after the end of this Budget session, the 15th Lok Sabha would be completing four years of its term. Currently, 112 Bills are pending in Parliament. Given the limited time — two and a half sessions — left before the elections, the government will have to harness all its consensus-building and persuasive skills to pilot its priority list through Parliament.

The next few weeks will display the government's ability in moving forward on its economic reform and social reform programmes.